Optimizing Oil and Gas Depletion in the Maturing North Sea with Growing Import Dependence

Hydrocarbon production from the UK Continental Shelf has now passed its peak. Net gas import requirements started in 2004 and increase substantially. The remaining reserves of both oil and gas are substantial, but are distributed largely in relatively small fields. Historically, depletion policy has generally been determined by market forces with the need for early revenues being the major consideration. Currently, policy is concentrating on enhancing development and depletion by removing perceived barriers. It is possible to construct a case for reducing the depletion rate. This involves significant risks and costs, and it is concluded that optimization is more likely to be achieved by minimizing the resource costs of extraction. This entails the encouragement of both new field developments and incremental investments. Current licensing and regulatory arrangements generally recognize the need to enhance activity on fallow blocks/discoveries and to remove barriers facing entrants. These policies should be pursued with vigour. Copyright 2005, Oxford University Press.